Why The Fed's Interest Rate Rise Isn't Necessarily

This morning's announcement of a .25% interest rate rise,
the first since 2006, will naturally be of concern for everyone with a vested
interest in the real estate industry.

The key point to emphasize is that, despite a lot of
industry comment to the contrary in recent months, mortgage rates will not
necessarily follow interest rates on an upward trend.

Indeed it's quite possible that rates will fall even
further!

If we look back at the trail of events leading up to the
last Fed interest rate hike nine years ago, on several occasions a Fed Funds
Rate rise was met with an actual fall in mortgage rates.

Mortgage rates are more closely allied to bond market prices
and inflation and the relationship with Fed interest rates is nowhere near as
direct.

Even in the lead up to the Fed announcement today, rates
have generally been on a downward trend in recent weeks, as a range of other
more direct influences on the attractiveness of investing in Mortgage Backed
Securities (MBS) have held sway.

The other important consideration is that the Fed has, to
say the least, taken its time in making this decision, which has been widely expected
for some considerable time now. Stocks have been rising since the announcement,
as sufficient confidence within the Fed to make the leap says a lot about how
far the economy has recovered, after the years of recession.

With widespread predictions for the best real estate market
in 2016 since 2006, everything is still on course for continued prosperity in
the home purchasing arena. Today's rates rise is, in many respects, a ringing
endorsement of that forecast.

As always, please do not hesitate to contact us if you have
any specific questions.